Developers put luxury projects on hold

BANGKOK / PHUKET: Resort-area residential projects that are worth more than 10 billion baht have been put on hold now that demand from foreign investors is showing a significant drop since last year. The key areas affected are Phuket, Krabi, Hua Hin, Pattaya and Koh Samui.

According to a survey by The Nation newspaper last week, a number of property developers in these tourist destinations have postponed the completion of their projects while they wait for economic recovery.

International property agent CB Richard Ellis (CBRE) reported that the forward momentum in Phuket property over the last five years came to a halt in the fourth quarter of last year due to the global recession.

This has resulted in a significant drop in transactions, prices and project launches, while cancellations have increased considerably, the agent said.

“In many ways, the property market in Phuket is a foreign-driven market located on a Thai island,” said David Simister, chairman of CB Richard Ellis Thailand. “The bulk of visitors, hotels guests and property buyers are all foreigners.”

Nabeel Hussain, manager of CBRE Research, added: “Our earlier estimates called for as many as 1,700 condominium units [in Thailand] to be completed in 2009, but we believe a number of projects will be delayed due to slower take-up rates. Similarly, in the villa market, we have identified over ten projects with more than 450 units that went on hold or were delayed during last year’s fourth quarter alone. It also appears that around a quarter of all upscale hotel rooms under development are now on hold as well.”

However, since the start of 2009, CBRE did note some positive elements. These include the fact that tourist numbers in Phuket remain among the highest compared to other Asian resorts, and Phuket is less dependent on mortgage finance than other markets. 

“In the long-term, we remain bullish on this market, since we believe that buyers of luxury and high-end properties tend to make choices based on lifestyle and not primarily pricing. That said, it is unlikely that demand for these high-end properties will recover before the global economy improves.

“Our view is that potential buyers who are able to view investment with discretion, and who have suffered little from the global downturn, will still be interested in the near-term,” Simister added.

Colliers International’s head of research for Thailand, Risinee Sarikaputra, also said that the purchasing power of foreign investors, especially those from the United States, Europe, Hong Kong, and Singapore, has dropped significantly, 20% to 50%, depending on the location.

Demand for luxury residential projects at prices between 25 million and 50 million baht has dropped significantly in resort destinations,” she says.

With the market trend, a number of property developers planning to launch new projects have decided to postpone things.

Managing director of Knight Frank Charter (Thailand), Phanom Kanjanathiemthao, says that demand from foreign investors dropped a whopping 50% last month compared to the same period last year.

“In terms of market trends, we are advising property developers to put off the launch of their new residential projects until the second half of next year,” he added.

Nexus Property Consultants’ Managing Director Apisit Limlomwongse agrees that the property market is not in good shape, but he is not sure that the global economy is entirely to blame.  

The impact of the financial crisis on the Thai property market is less important than the current political uncertainty, “which is scaring away local and foreign buyers planning to purchase property in the Kingdom,” he explained. “Most of our potential buyers have suspended their decision to purchase and are waiting to see when the unrest will end.”

— The Nation